Page 84 - MYM 2016

Engaging Customers in the App World
In this article, we rst investigate various app revenue models, then discuss app retention and its relationship with the subscription model. We argue why a subscription model will be the future of app industry and who to and when to o er subscrip- tion. We investigate which metrics to use followed by strategic recommendations for implementing our proposed framework.
app revenue Models
Worldwide revenue from apps has been estimated at $41 billion, of which $14 billion is retrieved from in-app purchases (IAP); the rest comes from in-app advertisements (IAA) and paid apps (Statista, 2016c). IAP refers to additional content or services that can be purchased within
a free app. Currently, the two major app distribu- tion platforms, Apple and Google, keep 30% of all the revenue generated through IAP or paid apps. e rest of the free apps generate revenue through inserting in-app advertisements. App develop-
ers collect information regarding their user base and sell this comprehensive information to the ad publisher companies (e.g. Google’s AdMob). Ad publisher companies utilize this user information to deliver targeted ads to the users. It is import- ant to note that the revenue generated through in-app advertisements is only shared between ad
fig. 1: app revenue Models
publishers and app developers, and not app dis- tribution platforms. Paid apps require an upfront one-time payment. Both paid and free apps may sell user data to third parties, which are generally data analytics companies or ad publishers. Angry Birds, a popular free mobile game that o ers IAP, does
not have IAA and part of its revenue is generated by selling user information. In the US, IAP accounts for 76% of the Apple App store revenue, as reported by Forbes magazine (2013). e table below sum- marizes the app revenue models in terms of their key features, associated problems and examples of rms adopting a speci c revenue model.
The Major hurdle: app retention
ere are 2.2 million apps in the Google Play store and 2 million in the Apple App Store. Yet, downloading or purchasing an app does not signify usage intent over a long period of time. A recent Nielsen analysis found that on average, U.S. smart- phone users accessed 26.7 apps per month in the fourth quarter of 2014, a number that has remained relatively at over the last two years (Nielsen, 2015). Twenty-three percent of apps are abandoned a er being opened only once, while 70% of total app usage comes from just the top 200 applications, many available on multiple platforms (Localytics, 2016).
attributes
in-app advertisement (iaa)
in-app Purchases (iaP)
Paid apps (one-time)
subscription Model
Key Features
• Free download
• Target as many
downloads as possible
• User data sold to ad publishers (Google’s
Admob, InMobil)
• • •
Free/paid download Customized content Additional payment for:
1. Premium features OR 2. Premium content OR 3. Digital Goods
• Paid download
• No ads
• High quality expected
• Free download
• Auto-renewable
payments
• No ads
• Customizable time period
• Contractual
Problems
• High app churn
• Intrusive ads negatively
a ecting experience
• Not suitable for all kinds of apps
• Low purchase ratio
• Low adoption as value proposition unknown
• Only one monetization opportunity
• High switching barrier
• Longer commitment
Examples
Utility (Currency Converter)
Social Media (Facebook)
Gaming (Angry Birds) Entertainment (Djay 2)
Gaming (Minecraft) Productivity (Calendar 5)
Entertainment (HBOnow) Music (Spotify) Networking (LinkedIn)
84 | MINd YOUr MarkETING OCTOBEr 2016